Canadian Banks Explore Tokenized Deposits to Simplify Interbank Transfers

Canada's six largest banks are working on tokenized CAD deposits, which would allow for easier transfers between institutions. The project aims to move tokenized deposits between Canadian financial institutions and eventually connect it with other digital-asset initiatives.

The participating banks include BMO, CIBC, National Bank of Canada, RBC, Scotiabank, and TD. They have not launched a commercial product or disclosed which technology will operate the system, but they plan to issue tokenized deposits in Canadian dollars.

According to the announcement, the first phase focuses on transfers between banks, with the goal of connecting the system with other digital-asset initiatives in the long term.

The project's central challenge is interbank settlement, which involves determining what happens when a deposit created by one bank reaches a customer at another institution. The system must perform three functions: authorization, interbank coordination, and final settlement.